a reprint of yesterday’s Nate’s Notes Inter-Issue Commentary

Despite the fact that our fearless leaders in Washington just can’t seem to turn off the spigot when it comes to the flow of ineptitude they are demonstrating for the American people, the market just keeps pushing higher with each passing week… and though this trend obviously can’t go on forever, I want to start this month’s Inter-Issue Commentary off by reminding you of one of the newsletter’s most often quoted mantras, namely “trends often go on for far longer than seems reasonable.”

As it stands, all five of the major indices I use to gauge the health of the overall market are still flashing “bull market” signals (see “Eyebrow Levels” table below), and with a few notable exceptions, a great many of the individual stocks being recommended in the newsletter are still tracing out chart patterns that cannot be described as anything but “solid uptrends.”

As mentioned in the October issue, it has been a pretty solid year for investors who have had the courage to remain in the market (year-to-date, the newsletter’s Model and Aggressive Portfolios are up 38.7% and 80.3%, respectively, for example), and though everyone who has been long stocks for the year is currently feeling pretty good about things, history unfortunately tells us that the larger the gains ahead of a slide, the faster and steeper the slide often becomes once it gets underway…

Consequently, those of you who track my recommendations fairly closely will notice that, in response to everything that is going on in the world and how I see the market trading at this point in time, I have raised some (but not all) of the eyebrow levels a bit more in this month’s IIC in order to “draw our lines in the sand” now when things are calm rather than having to make decisions later when things might be a little more hectic and emotional… and though I am hopeful that the trend that is currently in place will continue to carry the market higher (or at least keep it in a sideways holding pattern) between now and when the November issue is published, rest assured that I will not hesitate to send out a Special Alert encouraging you to take some chips off the table before then if it seems prudent to do so.

In the meantime, I want to encourage you to remain as fully invested as you can comfortably be while still being able to fall asleep at night, with a particular emphasis placed on buying those stocks that are showing the best relative strength (but are still trading under their buy limits, of course).

In addition, I want to remind you yet again that unless you are using a full service broker (where the commissions associated with making trades is much steeper), there is absolutely nothing wrong with buying “just” 4 or 5 shares at a time of some of the more expensive stocks in the newsletter as you work to build a position as time goes by.  When they’re under their buy limits, the likes of Apple, Celgene, and Illumina, for example, remain among the most attractive stocks in the newsletter, even though they are “so expensive” per share!

Finally, though I am hopeful that you have heeded my advice and been careful to not own too much MannKind stock “just because it is cheap,” based on the emails I get, I know that many of you do, in fact, have positions in the stock.  Consequently, I want to remind you that the company is reporting its earnings tomorrow (Monday), and though nobody is expecting anything positive on the actual earnings front (the company is losing money and will continue doing so until it actually has a product on the market – this is typical for development stage drug companies), analysts and journalists alike (especially those with a bias towards shorting the stock!), will be listening to the conference call closely for any signs that the company is – or is not – making progress towards signing up a partner for Afrezza.

On the one hand, if Al Mann (the company’s founder and CEO) is able to say anything definitive and positive regarding a partnership, I believe it will represent the next-to-last nail in the coffin for the short sellers who are still hanging on waiting for the stock to go to zero (with an eventual approval of Afrezza representing the final nail, assuming that is how things play out).

But on the other hand… 

If all we hear from the company tomorrow is that they are still “in discussions with a number of potential partners,” even though it will not change my fundamental outlook for the company (partnerships take time to negotiate, and they should be done when the time is right, not just to coincide with earnings reports), I will be the first to admit that not only will an apparent lack of progress (even if there is actually a lot of good stuff going on behind the scenes) embolden the short sellers to increase the size of their bets yet again, it will also cause a lot of impatient – and understandably nervous – longs to sell some of their shares as well.

Consequently, I want to caution you that, following the conference call, you are encouraged to resist the temptation to buy on weakness (since the stock will likely remain under pressure for awhile in response to the “disappointing” news regarding a partnership)… but, conversely, you are also especially encouraged to step up and buy on strength if the stock does open strong (i.e. don’t kick yourself for “missing the bottom,” just get in there and buy some stock, even if you have to pay a bit more on Tuesday than you would have paid on Monday!  As counterintuitive as it seems, you should almost always feel good about paying a bit more to buy stocks that are heading the right direction when you purchase them than paying less and hoping that the drop in price is temporary!).

Stay tuned!

“Eyebrow Levels”

(used to help us gauge the overall health of the market*)